Campbell Soup Stays Neutral - Analyst Blog

By: Zacks.com

Posted: 1/3/2013 3:20:00 PM

Referenced Stocks: CPB;GIS;HNZ

Campbell Soup Company
(
CPB
) has remained successful in increasing its profitability through
continued focus on brand expansion and effective cost management.
However, we have maintained our long-term 'Neutral'
recommendation on the stock as we remain slightly cautious due to
rising input costs and intense competition.

Campbell recently reported its first-quarter fiscal 2013
results (ended October 2012).In accordance with its strategy of
brand expansion and cost management, Campbell once again reported
better-than-expected bottom-line results. The company's quarterly
earnings of 88 cents per share were 7.3% higher than the year-ago
quarter's earnings and were also ahead of the Zacks Consensus
Estimate of 85 cents.

Further, Campbell continues to anticipate a sales growth in
the range of 10%-12% and earnings between $2.51 and $2.57 per
share in fiscal 2013.

Going forward, the company's Bolthouse acquisition will prove
to be accretive to its fiscal 2013 top and bottom lines. In
addition, the company intends to boost its top line and increase
return on investment through a new strategic framework, primarily
focusing on brand expansion, and launch nearly 50 new products in
fiscal 2013 while emphasizing on brand advertisement and consumer
promotional activities.

We believe that Campbell's prudent investment and strategic
initiatives toward product innovation and brand building will
increase its customer base and profitability. Moreover, the
company's continuous focus on research and development, to
further differentiate its higher-margin sauce brands, will
strengthen its competitive position in the international
market.

On the flip side, rising commodity costs, intense competition
from other established players and exposure to unfavorable
foreign currency fluctuations may undermine the company's growth
prospects.

Due to its high exposure to international market, Campbell
Soup remains prone to currency fluctuations, which is a major
reason for continuous decline in its International Simple Meals
and Beverages segment. Sales at this segment dipped 1.0% to
$354.0 million in the first quarter 2013, primarily due to 1%
decline in volume and mix and 3% negative impact from currency
translation.

Moreover, Campbell operates in a highly-competitive food
industry and experiences worldwide competition in all its
principal products from well-established rivals like General
Mills and H. J. Heinz, which may dent its performance going
forward.